Management Information System

Anjali Kaushik
Management Development Institute, Gurgaon
E-Mail: [email protected]
 Learning Objectives

 Understanding the effects of information systems on business

 Define an information system and describe its management, organization,

and technology components.

 Define complementary assets and explain how they ensure that information
systems provide genuine value to an organization.

Contd…
Key Concepts
 IS vs. IT
 MIS and Decision Making
 Complementary Assets
 Types of Information Systems (TPS, DSS and ESS etc; Functional
Information Systems)
 Introduction to Strategic IS Management
 How do systems serve the various levels of management in a business
 Types of Information Systems (TPS, DSS and ESS etc; Functional
Information Systems)
 Systems that span the Enterprise: Enterprise Systems: ERP, SCM, CRM, KMS
 IS Department Roles (CIO, CISO, CKO)

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Information and Data
 Data: Raw Facts or observations about physical phenomena or
events occurring in an organisation. All data is stored and
transmitted as 0’s and 1’s ..
 Information: Data placed in a meaningful and useful context
for an end user.
What is important? Data processing
Information processing

Data Processing Information

 Perspectives on Information Systems

Data and Information

Figure 1.3 Raw data from a supermarket checkout counter can be processed and organized to produce meaningful information, such as
the total unit sales of dish detergent or the total sales revenue from dish detergent for a specific store or sales territory.
Critical data points..
 Critical data points may vary by the nature of the industry
◦ Healthcare: Patient data, disease data, doctor, health insurance etc
◦ Education: student, school, teacher, student: teacher ratio
◦ Banking: deposits, loans, average balances, transaction details
 Decisions need Data…
 From data to information to actionable insights

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Why Is Information Important?

Often organizations are data rich, information poor!!!

A GOOD INFORMATION SYSTEM CAN MAKE THE

DIFFERENCE…
Desirable Qualities of Information
Include..
CARTA

 Complete
 Accurate
 Relevant
 Timely
 Appropriately presented

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 Information as a resource
 Organisations process information which forms a valuable
organisational asset that has to be managed and used for different
purposes.

 These information stores are by-products of the processes of the

organisation and are stored in various forms in databases or in
some compressed form through the process of archiving.

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 THE SYSTEM ONLY HELPS THE MANAGER IN
MAKING DECISIONS. IT DOESNOT MAKE THE
DECISION ITSELF….

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Information Systems Are More Than
Computers
 IT: Hardware, Software, Network, Database
 IS:
◦ Inventory Management System
◦ Accounting Management System
◦ Human Resource Information System
◦ Financial Management System
◦ Manufacturing (operations/production) information system
◦ Marketing information system

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Information Architecture and Information Technology
Infrastructure
 What is an Information System?
A set of interrelated components working together to collect (or retrieve),
process, store, and disseminate information to support decision making,
coordination, control, analysis, and visualisation (of complex subjects) in an
organisation.

Input Process Output

Classify
Arrange
Calculate

Feedback
 Information Systems: Organisational
Perspective
An Information System (IS) is a set of people, procedures, and resources
that collects, transforms, and disseminates information in an organisation.

Business Environment
The Organisation
Business Strategies
Business Processes
Information Business
Structure and Culture Use
System Value
Technology Infrastructure Users
KEY SYSTEM APPLICATIONS IN THE ORGANIZATION

Types of Information Systems

Figure 2-1
Information Requirements of Key Decision-Making Groups in a Firm
 IS are all pervasive:
◦ Across functional areas (finance, HR, marketing, production
etc)
◦ Across responsibility level (strategic, middle management,
operational level)

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 Variation in Returns on
Information Technology Investment

Although, on average, investments in information technology produce returns far

above those returned by other investments, there is considerable variation across
firms.

 Investing in information technology does not guarantee good returns

 Considerable variation in the returns firms receive from systems investments
 PERSPECTIVES ON
INFORMATION SYSTEMS

Factors:
Adopting the right business model
Investing in complementary assets (organizational and management capital)

Complementary Assets and Organizational Capital:

Complementary Assets are those Assets required to derive
value from the primary investment.
Research says that IT investments alone cannot make
organizations and managers more effective unless they are
accompanied by New business processes,
Management behavior, Organizational culture,Training
(organizational and management capital)
 Business Processes and
Information Systems

• Business processes:
Workflows of material, information, knowledge
Sets of activities, steps
May be tied to functional area or be cross-functional

• Businesses: Can be seen as collection of business processes

• Business processes may be assets or liabilities

• Business processes can be a source of competitive advantage
• How could a business process be a liability?
Business Processes
 Examples of business processes

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Business Processes
 Examples of business processes
◦ Developing a new product
• Examples of functional business processes
Manufacturing and production
 Assembling the product
Sales and marketing
 Generating and fulfilling an order
 Identifying customers
 Creating a marketing plan
Finance and accounting
 Creating financial statements
Human resources
 Hiring employees
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 Business Processes and
Information Systems
The Order Fulfillment Process

Figure 2-1 Fulfilling a customer order involves a complex set of steps that requires the close coordination of the sales, accounting, and
manufacturing functions.
 Types of Information Systems

 Transaction Processing System

 Decision Support System
 Executive Support System
 Knowledge Management System

◦ MIS should be need based. It should cater to the specific

needs of Managers in an organizations hierarchy.
Characteristics of MIS
 For designing the MIS, Top down approach should be followed.
◦ System development starts from the determination of management needs and overall
business objectives.
◦ MIS development plan should be derived from the overall business plan.
 MIS should not only provide past or historical information, it should also
provide information on the basis of projections based on which actions are
taken.
 Central database and common data flows: A central database can provide
data needed by any of the functional systems in the organization. This
avoids duplication, redundancy and inconsistencies in data.

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5 Main MIS Functions
 Data capturing
 Processing of data
 Storage of data
 Retrieval of information
 Dissemination of information

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 MIS should provide an integrated and comprehensive view including the
inter-locking sub-systems in the company.
 For example, a production scheduling system has to balance factors such as
◦ Set-up costs
◦ Workforce
◦ Overtime rates
◦ Production capacity
◦ Inventory level
◦ Capital requirements
◦ Customer services etc
Across multiple functional areas..

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Types of Information Systems: Transaction Processing
system
 A Transaction is any activity of the organization that generates
information eg buying a Ticket

 Transaction processing systems record all transactions as they

happen, storing transaction data and preserving a digital
record of the functioning of the enterprise.

 The data is transferred into large databases that become a

resource that the organization can use

 They are designed to respond quickly to the user, through

carefully designed interfaces that guide users through various
transactions.

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 Transaction Processing Systems (TPS)
Basic business systems that serve the operational level such as
accounting & finance transactions, basic sales, personnel, & production activities.”

A computerized system that performs and records the daily

routine transactions necessary to the conduct of the business
TPS is the backbone of an organization’s information systems.
It monitors, collects, stores, processes & disseminates information for all routine
core business transactions.
These data are input data to functional information systems applications, DSS, and
CRM.
TPS collects data continuously, frequently on a daily basis, or even in “real time”.
The transaction processing systems are considered critical to the success of any
organization.
 Types of Information Systems

A Payroll TPS
A TPS for payroll processing
captures employee payment
transaction data (such as a
time card). System outputs
include online and hard-copy
reports for management and
employee paychecks.

Figure 2-2
 Systems for Management Support
There are three kinds of systems that support the different levels
and types of decisions:
• Management Information Systems (MIS)

• Decision-Support Systems (DSS)

• Executive Support Systems (ESS)

 Management Information Systems (MIS)

Management level

• Inputs: High volume transaction level data

• Processing: Simple models

• Outputs: Summary reports

• Users: Middle managers

Example: Annual budgeting

Provide reports on firm’s current performance, based on data from TPS
Typically have little analytic capability
 Types of Information Systems: Management
Information Systems
 MIS process data generated by Transaction processing systems, by
aggregating data into reports to be used by the management, to sense and
monitor the organisation.

 Real-time monitoring involves presenting data as soon as it is created

 Batch mode monitoring aggregates data over a period of time, allowing

drilling down to details

 Specific reports are tailored for specific decisions and hence the need for
MIS to be designed to meet the specific requirements of managers

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 MIS at different levels

 Needs of managers at different levels are different

 Executives at the highest level require aggregated data – Executive

Support Systems (ESS) provide such reports which use graphs,
charts and diagrams

 Managers who report to Executives use Decision Support Systems

which use scientific models of decision making on available data

 Knowledge workers use sophisticated models to analyse

transaction data and data related to the industry and economy eg
designers, planners, financial analysts

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 Types of Information Systems

How Management Information Systems Obtain Their Data from the Organization’s TPS

Figure 2-3 In the system illustrated by this diagram, three TPS supply summarized transaction data to the MIS reporting system at the end of
the time period. Managers gain access to the organizational data through the MIS, which provides them with the appropriate
reports.
 Types of Information Systems

Sample MIS Report

Figure 2-4 This report, showing summarized annual sales data, was produced by the MIS in Figure 2-3.
 Types of Information Systems

 Decision support systems

Serve middle management
Support non-routine decision making
 Example: What is impact on production schedule if December sales doubled?
Often use external information as well from TPS and MIS
Model driven DSS
 Railway-ticket-estimating systems
Data driven DSS
 Marketing analysis systems
 Decision-Support Systems (DSS)

Management level

• Inputs: Transaction level data

• Processing: Interactive

• Outputs: Decision analysis

• Users: Professionals, staff

Example: Contract cost analysis

 SYSTEMS FOR DECISION SUPPORT

Decision Support Systems:

• Support semi structured and unstructured problems
• Supports What-if analysis, Goal seeking analysis, sensitivity analysis
• Greater emphasis on models, assumptions, ad-hoc queries, display graphics
• Emphasizes change, flexibility, and a rapid response
Simon’s Model of Decision-making
 The decision-making process consists of 3 Phases
◦ Intelligence: The Phase of problem solving and decision making where the person seeks
information about the problem
◦ Design: The Phase of decision making where the person determines the criteria by
which to find the best solution
◦ Choice: The third phase of decision making where the person uses the criteria to select
the solution out of many available.

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Intelligence
 Environment scanning
◦ Production manager reviews quality control/ production/
scrap report
◦ Sales executive visits customers
 Problem searching
◦ Difference between expected (benchmark/ standard) and
reality
 Problem formulation

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Design
 Identify alternatives
◦ What-if analysis
◦ Goal seeking
◦ Sensitivity analysis

Choice
◦ Select an alternative

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Decision Support System (DSS)

Figure 2-7
 DSS are used infrequently, mostly on a ad hoc basis.
 MIS are used regularly

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 Management Information Systems
Chapter 13 Enhancing Decision Making for the Digital Firm

SYSTEMS FOR DECISION SUPPORT

A DSS for Customer Analysis and Segmentation

Figure 13-6
CASE:
REVENUE OPTIMIZATION AT TAJ HOTELS-
PAGE 359 IN BOOK

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 Types of Information Systems

 Business intelligence

Class of software applications

Analyze current and historical data to find patterns and trends and aid decision-making

Used in systems that support middle and senior management

 Data-driven DSS
 Executive support systems (ESS)
 EXECUTIVE SUPPORT SYSTEMS (ESS):

• Inputs: Aggregate data

• Processing: Interactive

• Outputs: Projections

• Users: Senior managers

Example: 5 year operating plan

 Types of Information Systems

 Executive support systems

Support senior management

Address non-routine decisions
 Requiring judgment, evaluation, and insight
Incorporate data about external events (e.g. new tax laws or competitors) as well as
summarized information from internal MIS and DSS
Example: Digital dashboard with real-time view of firm’s financial performance: working
capital, accounts receivable, accounts payable, cash flow, and inventory
 EXECUTIVE SUPPORT SYSTEMS (ESS) (Continued)

• Top Level Management

• Designed to the individual senior manager

• Ties CEO to all levels

• Very expensive to keep up

• Extensive support staff

A Screenshot of an ESS (simulated)

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Decision making with MIS: Tactical Decisions

 Tactical decisions are those that have short-term

impact and are taken by workers and operators
 Examples
 Nurse taking care of a Patient

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Decision making with MIS: Operational Decisions

 Decisions that have a medium-term scope and are made by managers are Operational
decisions

 These are based on aggregate data and are often supported by decision support systems

 Control and planning are important activities involving operational decisions

 Examples

 Inventory levels to be maintained to meet the production targets for the firm and also
control the amount of working capital locked into inventory.

 Finance Managers to decide on best allocations for investment into various market
opportunities

 Software project managers to decide the number of people on the project, money
allocated , deliverables, estimation etc
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Decision making with MIS: Strategic Decisions

 Strategic decisions are decisions taken by top-level executives that have

long-term impact on the very manner in which the organisation does its
work

 They are related to the vision and mission of the organisation

 Examples

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Interrelated Support Systems

Non Computer
Support
Transaction MIS DSS
Processes

External Data EIS

Information Warehouse

Internet, other
Computer Support
 Knowledge Management Systems(KMS)

Knowledge Management Systems are knowledge based information systems that support the
creation, organization and dissemination of business knowledge to employees and managers
throughout the company.
KM refers to practices organisations follow to identify, capture, store and reuse the insights and
experiences of their employees and the codified experiences that are stored in their data and
information repositories. Knowledge is categorised as -
 Declarative knowledge (invariants/ facts)
 Procedural knowledge
 Explicit knowledge
 Tacit knowledge
 Expert knowledge
 Casual knowledge
 Contextual knowledge

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Knowledge Life Cycle: Value of knowledge

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 Knowledge Life Cycle: Value of knowledge
 Knowledge creation – The task of explicitly encoding knowledge or recording
who has the knowledge.
 Knowledge development – The task of validating and verifying the knowledge to
ensure it is from an authetic source and is accurate.
 Knowledge use – The act by which organisational knowledge is applied in
situations where it is required
 Knowledge degradation – The process by which knowledge becomes less useful
in a given context. The degardation can be graceful, when it slowly becomes less
useful, or it may degrade suddenly.

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 Strategies for Knowledge Management
 Identify Knowledge Needs – both knowledge about the external
environment and about the internal workings of the organisation.
Management can organise the Knowledge function through -
◦ Hierarchic Approach – top management drives it
◦ Market Approach – knowledge created and used by demand and supply
conditions
 Challenges to Knowledge Management –contradiction in knowledge
sharing by an employee; an employee sharing knowledge freely, weakens
his competitive position in the organisation lowering his advantage;
which discourages knowledge sharing.

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Technologies for Knowledge Management: Expert Systems

 Systems that encode human knowledge and reasoning in a set of rules,

pertaining to a domain, which can be applied to solve problems in the same
domain.
 The crucial requirement for Expert Systems is having a human expert who
can be queried and modelled.

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 Technologies for Knowledge Management: Content Management
Systems (CMS)
 A system used to store and retrieve documents. The documents may be stored and accessed
by any group within or outside the organisation.
 A typical CMS consists of a database and a front-end that can be accessed by a browser
 CMS are also referred to as learning management systems when used as repositories of
codified knowledge.

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 Technologies for Knowledge Management: Mind Maps

 Diagrams that depict a central node around which are arranged, through
links, related ideas, concepts and themes. These diagrams can be created
and shared by a group.

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In Strategic Information Systems (SIS), IT becomes an integral
component of business processes, products and services that help a
company gain competitive advantage in the global market place.

Cross- functional information systems

Integrated combination of several types of cross-functional systems.
RECAP
 IS vs. IT
 Data vs. information
◦ The CARTA principles
 Types of IS
◦ TPS, MIS, DSS, ESS, KMS
 Business process definition/ examples

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HOW
INFORMATION SYSTEMS
SUPPORTS FUNCTIONS

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 Information in Organisational functions
 In modern organisations, information, data and information systems are
used extensively within and across organisational functions, across
hierarchies.

 Typical functions in an organisation include accounting and finance,

marketing, operations, human resource management and information
systems management.

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Classification by Functional Area
The major functional information systems are the following:
 The marketing information system
 The manufacturing (operations/production) information system
 The accounting information system
 The finance information system
 The human resources management information system
 Marketing Information Systems
Marketing
Information
Systems

Customer
Interactive Sales Force Sales
Relationship
Marketing Automation Management
Management

Market Advertising
Product
Research and and
Management
Forecasting Promotions
Manufacturing Information Systems

Intranet

Computer Integrated Manufacturing

Manufacturing Manufacturing Engineering
Resource Execution Systems
Planning Systems Remote
•CAD Worker
•Production •Shop Floor •CAE
Forecasting •Scheduling •Computer- Supplier
•Production •Machine Control Aided
Scheduling •Process Control Process
•Quality Control •Robotic Control Planning

Extranet
Accounting Information Systems
Human Resource Management
Training & Compensation
Staffing Administration
Development
•Manpower •Succession
Strategic •Contract
Planning planning
Systems costing
•Labor Force •Performance
•Salary forecast
Tracking appraisal plans

•Labor Cost •Training •Compensation

Tactical Analysis effectiveness effectiveness
Systems •Turnover •Career •Benefits
Analysis matching Analysis

•Payroll
•Recruitment •Skill assessment
Operational control
•Workforce •Performance
Systems evaluation •Benefits
Planning
Administration
 Classify these systems into TPS, MIS, DSS, ESS, KMS etc

1. Marketing
a. Sales order Information System-
b. Market Analysis (Identify Markets and Customers)-
c. Sales Commission System-
d. Order processing system-
e. Sales Region Analysis-
f. Pricing Analysis-
g. 5-Year Sales Forecast-
2. Manufacturing/ Production Systems
a. Machine Control Systems-
b. Material Resource Planning system-
c. Production Planning-
d. New Product Design through CAD-
e. Inventory Control-
f. 5-Year Operating Plan-
g. Purchase Order Systems-
h. Quality Control Systems-
i. Facilities Location-
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Individual Assignment
 Visit Oracle Peoplesoft Applications
 Select Human Capital Management and Review the HR application.
Describe three Best Practices supported by the Module.
 Select Financial Management. How does this Module reduce cost?
 Review Salesforce.com. What functional support does the Module
provide to the Sales Team.
  Classify these systems into TPS, MIS, DSS, ESS, KMS etc

1. Finance Accounting System

a. General Ledger
b. Accounts Receivable/ Payable
c. Budget Planning
d. Funds Management System
2. Human Resource Systems
a. Payroll
b. Employee Records
c. Compensation Analysis
d. Benefit systems
e. Personnel Planning
f. Appraisals
3. Others
a. Student registration system

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 Types of Information Systems

• Enterprise applications
Systems for linking the enterprise
Span functional areas
Execute business processes across firm
Include all levels of management
Four major applications:
 Enterprise systems
 Supply chain management systems
 Customer relationship management systems
 Knowledge management systems

© Prentice Hall 2011

 Types of Information Systems

Enterprise
Application
Architecture
Enterprise applications
automate processes that
span multiple business
functions and organizational
levels and may extend
outside the organization.

Figure 2-6
 Types of Information Systems

• Enterprise systems

Collects data from different firm functions and stores data in single central data
repository
Resolves problem of fragmented, redundant data sets and systems
Enable:
 Coordination of daily activities
 Efficient response to customer orders (production, inventory)
 Provide valuable information for improving management decision making
MAJOR TYPES OF SYSTEMS IN
ORGANIZATIONS
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 Types of Information Systems

 Supply chain management (SCM) systems

Manage firm’s relationships with suppliers

Share information about
 Orders, production, inventory levels, delivery of products and services
Goal:
 Right amount of products to destination with least amount of time and lowest cost
 Types of Information Systems

• Customer relationship management systems:

Provide information to coordinate all of the business processes that deal with customers
in sales, marketing, and service to optimize revenue, customer satisfaction, and customer
retention

Integrate firm’s customer-related processes and consolidate customer information from

multiple communication channels
 Types of Information Systems

• Knowledge management systems (KMS)

Support processes for acquiring, creating, storing, distributing, applying, integrating

knowledge
 How to create, produce, distribute products and services

Collect internal knowledge and experience within firm and make it available to
employees

Link to external sources of knowledge

 Types of Information Systems

• E-business
Use of digital technology and Internet to drive major business processes

• E-commerce
Subset of e-business
Buying and selling goods and services through Internet

• E-government:
Using Internet technology to deliver information and services to citizens, employees, and
businesses
THANK YOU

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